And the state is not going to try to set up its own guest-worker program to help firms struggling to find qualified workers.

There were a few small victories, however; notably the decision to extend and expand tax credits for research and development.

Whether the outcome of one measure is a win or a loss depends on which businesses' interests are considered: the refusal of legislators to provide a new tax credit to lure solar manufacturers to Arizona.

Focus on foreign workers

Much of the focus this session, as a year ago, remained on the issue of illegal immigration.

Many business groups opposed a 2007 law allowing judges to suspend the licenses of any firm found guilty of knowingly hiring undocumented workers. A second violation while a company is on probation puts it out of business.

They could not stop the bill from becoming law, and efforts to have it invalidated were turned away by a federal judge. The issue now is pending before the 9th U.S. Circuit Court of Appeals.

In the interim, that left lobbyists seeking to minimize its impact.

Legislators did agree this year to clarify the statute so that the penalties would apply only if the illegal worker had been hired on or after Jan. 1, the day the statute took effect. That means a firm cannot face suspension if the undocumented worker already was on the payroll.

Companies also were given some additional legal protections if they followed certain procedures.

But lawmakers spurned requests to bar investigations based on anonymous complaints, what some said was a big concern amid fears that a competitor or disgruntled employee could trigger an inquiry.

That led to efforts on the other side of the equation: getting more legal foreign workers.

Senate Bill 1508 would have allowed companies that could not get workers in this country to recruit them instead in Mexico.

Senate Minority Leader Marsha Arzberger, D-Willcox, said Arizona firms already were suffering because of the lack of qualified workers before the employer-sanctions law took effect in January. She said that is because the federal government does not provide enough temporary-work visas to meet the legitimate needs of companies here.

"Here we are standing alone with the most stringent employer-sanctions law in the nation, and we couldn't balance it with a legal program for immigrant workers," Arzberger said. "That puts us in the economic cellar."

"It's a slap in the face, at a time we're laying off American workers, to want to import more foreign workers," he said.

Pearce said he was willing to consider a guest-worker program for agriculture, given the necessity of farmers to harvest their crops and Americans to have fresh produce. But he said anything else made no sense.

But Rep. Bill Konopnicki, R-Safford, who co-wrote the measure, said other segments of the economy are suffering, too.

He cited the testimony of the owner of a Phoenix steel-fabricating firm who said he had to get rid of 12 of his 40 production workers because they could not prove they were in this country legally. Sheridan Bailey said that without the ability to hire foreign workers, his company and others will be unable to remain fully staffed.

Sen. Ron Gould, R-Lake Havasu City, said the legislation lacked other safeguards. One he wanted in particular was a provision stating that children born to temporary workers while they are in this country are not entitled to U.S. citizenship.

Gould said that was designed to combat court rulings that have concluded that anyone born on U.S. soil is automatically a U.S. citizen. He said that creates "anchor babies," with their families then seeking permission to remain in this country.

Solar tax credit spurned

The relatively united front on immigration and labor issues did not exist on the question of solar tax credits.

Barry Broome, president and chief executive officer of the Greater Phoenix Economic Council, said more than $148 billion was invested last year in both public and private funds in "renewable technology," primarily solar. And he said the state is competing for $8 billion in projects and about 7,800 jobs.

The legislation would have given qualified firms an 80 percent break in property taxes for 10 years if the average wage was at least 150 percent of the state median wage - 15 years if the average wage is at least 200 percent of that figure.

Figures from the federal Bureau of Labor Statistics put the median wage last year at $37,560.

Companies also would have to pay at least 80 percent of health-insurance premiums for all their workers to ensure that those at the bottom of the pay scale did not qualify for state-paid health care.

Qualifying firms also could get corporate and individual state income-tax credits, credits they could sell to other firms if they could not use them.

Broome pointed out that the Arizona Corporation Commission has mandated that investor-owned utilities must generate at least 15 percent of their electricity from "renewable" sources by 2025. But he said that's not enough to stimulate the industry here.

"Even though we have the sun, we've created this tremendous renewable (energy) rate ... we're losing these companies to competitor states," he said.

All that may be true, said to Kevin McCarthy, president of the Arizona Tax Research Association, whose members include many major taxpayers. But he said this kind of special treatment to lure certain industries ignores and only delays fixing what he said is a flawed property-tax system.

Residential property is assessed for tax purposes at 10 percent of its value. For business, that figure is 23 percent, though it is going to 20 percent during the next three years.

But that still leaves a disparity - including that businesses, unlike homeowners - pay tax not only on land and buildings but all their equipment, from major presses to individual file cabinets.

The result, he said, is a mess of special legislation.

"For years, what happened as a result of that, is folks who didn't want to pay that going rate of taxes would hire lobbyists to come down here, and before they made an investment, (said), 'Let's see if we can cut our losses and pay less in taxes than what everybody else here is paying,' " McCarthy said. That led to this special property-tax classification that is 80 percent less for qualifying firms. The net result, he said, is to actually increase taxes for companies that don't get the same special breaks.

"Property taxes are largely a zero-sum game," McCarthy said. Because most levels of government decide how much they are entitled to raise, that means if one company pays less, the difference is borne by everyone else. In the end, ATRA's position won out and the legislation died.

R&D, roads win big

But being united did not always signal success.

Business groups persuaded lawmakers to repeal the state property tax permanently. It was suspended in 2006, when the state had more money than it needed, and is scheduled to come back in force late next year.

But the Legislature was overruled when Gov. Janet Napolitano vetoed the measure. That led to an effort to put the question to voters in November. That plan gained House approval but died in the Senate, as did an alternate approach to continue the suspension for three more years.

But lawmakers did insert provisions in the budget to expand the credit available for new research and development to 24 percent of the amount, up from 20 percent. And for amounts above $2.5 million, the difference will be $600,000 plus 15 percent of that excess over $2.5 million. The current figure is $500,000 plus 11 percent.

Businesses also entered the 2008 session with hopes that lawmakers would accelerate freeway construction.

But various proposals to have that done by the state, or even through toll roads, proved to be non-starters. When legislators showed little interest in even putting the measure on the ballot, businesses went to the streets themselves to get the signatures for a plan asking voters to hike the state sales tax by a penny, to 6.6 percent, to raise $42.6 billion over 30 years.

Business lobbyists did persuade legislators to block the state from imposing its own greenhouse-gas emission standards. But the governor vetoed it.